Why Sihuan Pharmaceutical Holdings Group's (HKG:460) CEO Pay Matters

This article will reflect on the compensation paid to Weicheng Guo who has served as CEO of Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) since 2014. This analysis will also assess whether Sihuan Pharmaceutical Holdings Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Sihuan Pharmaceutical Holdings Group

Comparing Sihuan Pharmaceutical Holdings Group Ltd.'s CEO Compensation With the industry

At the time of writing, our data shows that Sihuan Pharmaceutical Holdings Group Ltd. has a market capitalization of HK$8.3b, and reported total annual CEO compensation of CN¥6.0m for the year to December 2019. That is, the compensation was roughly the same as last year. It is worth noting that the CEO compensation consists entirely of the salary, worth CN¥6.0m.

On comparing similar companies from the same industry with market caps ranging from HK$3.1b to HK$12b, we found that the median CEO total compensation was CN¥1.5m. This suggests that Weicheng Guo is paid more than the median for the industry. Furthermore, Weicheng Guo directly owns HK$290m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 59% of total compensation represents salary, while the remainder of 41% is other remuneration. At the company level, Sihuan Pharmaceutical Holdings Group pays Weicheng Guo solely through a salary, preferring to go down a conventional route. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Sihuan Pharmaceutical Holdings Group Ltd.'s Growth Numbers

Over the last three years, Sihuan Pharmaceutical Holdings Group Ltd. has shrunk its earnings per share by 95% per year. Its revenue is down 31% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Sihuan Pharmaceutical Holdings Group Ltd. Been A Good Investment?

Since shareholders would have lost about 58% over three years, some Sihuan Pharmaceutical Holdings Group Ltd. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Sihuan Pharmaceutical Holdings Group rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we noted earlier, Sihuan Pharmaceutical Holdings Group pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. To make matters worse, EPS growth has also been negative during this period. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Sihuan Pharmaceutical Holdings Group that investors should be aware of in a dynamic business environment.

Important note: Sihuan Pharmaceutical Holdings Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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